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The Business Outlook 2007 and Beyond
30 October 2006

Is Richard Holway right when he says that the glory days of IT are well and truly over?  Do we, as an industry, have to stop living in denial or is there still plenty of life left in corporate IT?  Has the industry become mature and boring, consolidating and paying dividends?  Would you advise your grandchildren to go into corporate IT? 

The real excitement is an IT-enabled world.  Whole new businesses are being built around falling ICT prices and expanding broadband access.  As the web 2.0 model begins to bear fruit, companies are delivering services in innovative ways.  There are now 4.2 billion connections in the world up from 3.5 billion a year ago.  Search and mobility are booming.  There is a wide expectation that in 2007, search will replace email as the number one application and this is reflected in the infrastructure build up.  Notebooks will become inexpensive and hugely prolific whilst large companies will centralise their data centres.  Flexible hardware, middleware and software will enable an increase in productivity, which is a real area of opportunity for the industry with a major take-up of IT in transformational business.  SAAS (software as a service) will become more prevalent delivering 80-90% of functionality for 10-20% of the price.  Technology will become invisible and reliable.

The winners and losers in 2007 will be measured by those who outsource to India.  Xansa realised this ten years ago and since then many other companies have acquired or are acquiring Indian capabilities.  The Indian phenomenon has impacted on the fundamental rules of business: time to market, costs and quality.

Indian outsourcers have reduced time to market, cut costs by 30-40% and their quality is at least comparable with CMM level 5 (the capability maturity model for software) being put on the agenda by Indian outsourcers.  AD&M (application development and maintenance) services in the top tier corporate market have become a commoditised service where competition is on the basis of cost. 

Is there more to IT than plentiful cheap labour?  Intel’s experience with a $3 billion investment in a new fab in EIRE says that there is.  EIRE was chosen not for cheap labour, but for a plentiful supply of well-educated individuals.  BT have had an Indian development centre for ten years but continue to develop innovative new products in the UK.

In the meantime, the UK faces the perennial problems of low productivity and poor exploitation of the science base by industry.  Government has failed to use the tax system to promote the UK as the place for multi-nationals to locate their headquarters and there are fewer and fewer tech companies owned in the UK.

Will the public sector realise the benefits of offshoring?  The treasury wants change and is ready to think and work differently particularly in the area of shared back office services, but large government centralising projects come with significant political and commercial risk.  In the meantime, the public want to see transformations in the shared front office and government has to understand that the projects that are sustainable are those that succeed socially.

For many people today, technology is an everyday tool. There will be no patience for a government that cannot use technology to deliver the services it provides to citizens or young entrepreneurs. The next generation of doctors, policemen/women and teachers, and tomorrow’s voters will know what can be done with technology and they’ll expect to see it in all aspects of their lives.

Looking to 2007, Intellect and our members are working together to put the hi-tech industry at the very heart of modern society and the economy. Members will re-double efforts to ensure all public sector departments get better results from their ICT investments. Together we will be working to improve the business environment for our members, shaping markets and supply chains and developing and sharing best practice to create competitive advantage over non-members.